The Next in Digital Payments Market of India

The transformational phase of the Indian payment industry owes mainly to progressive regulatory policies and a boost in the use of mobile internet. According to a research conducted by Credit Suisse Group AG, the Digital Payments Market of India is poised to augment 5-fold from its current level of $200 billion to $1 trillion by 2023, as reported by The New Indian Express.

The primary augmentation received in India by the digital transactions sphere was the demonetisation wave of November 2016, following which people were compelled to resort to making digital payments. As a result, the technically savvy generation took the lead to participate in and furthering the trend of digital and app-wallet payments. Cashbacks and digital transaction discounts have already made this virtual medium of payment a lucrative alternative for the people of India.

The rivalling market players in the digital payments space of India include the domestic giants PayTm and Mobikwik, Google Pay (formerly Google Tez), Facebook’s WhatsApp Pay, PhonePe by Flipkart, and BHIM App–developed on the United Payment Interface (UPI) platform, launched by the Government of India (GoI). Then there are also equally competent players like the GoI launched India Post Payments Bank (IPPB), Jio Money, and Amazon Pay. With these many players active in the market, reach expansion was attempted with the digital wallets began directing customers to resort to using their platforms even for making the offline point of sale (POS) transactions. These offline POS included making digital payments at shopping malls, supermarkets, grocery stores, restaurants, petrol pumps, etc.

Google and Boston Consulting Group (BCG) report suggest that, the Indian digital payments industry is projected to reach $500 billion by 2020 (contributing 15% of the GDP of India). The Google-BCG report also states that, as reported by India Brand Equity Foundation, the digital payments landscape will primarily witness a wave of microtransactions (of value below Rs. 100). It is estimated that 50% of merchant transactions will be of below Rs.100, per the Google-BCG report. According to the World Payments Report 2018 by Capgemini, mobile wallets space is poised to experience a compound annual growth rate (CAGR) of 148% in the following 5 years. It will be $4.4 billion by 2022. The incoming of payments banks, digital wallets, and BharatQR is also furthering digital payments adoption.

The Future Trends in the Digital Payments space of India will revolve around witnessing a deeper penetration of UPI (with the virtual payment address or VPA creation issue solved via API apps built by 3rd party developers), QR Code (eliminating the need for NFC or EDC machines; easing merchant acquiring), cyber-security (managing risk and controlling fraud via biometric authentication, artificial intelligence, machine learning, and pattern matching), and consolidating payments spaces. Inc42 reports that as of October 2018, of the 800 million mobile phone users in India, mere 200 million use smartphones, of which, just 6 million phones are NFC enabled. There is a dire need of interoperability so as to also tap the so far untapped population into the budding payment ecosystem of India.